The Manufacture of Folic Acid Is a Competitive Business

question 31

Multiple Choice

The manufacture of folic acid is a competitive business. A new plant costs $100,000 and lasts for three years. The cash flow from the plant is as follows: year 1: +$43,300; year 2: +$43,300; and year 3: +$58,300. (Assume no taxes.) If the discount rate is 20 percent, what is the value of the plant at the end of year 1?

• A)+$76,569
• B)-$23,400
• C)$48,600
• D)None of the options are correct.

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Definitions:

Assignable Variation

Variability in a process that can be traced to specific causes, as opposed to random variation.

Control Limits

Statistical boundaries in process control that indicate the maximum and minimum values allowed for process variation to ensure quality.

Process

A process is a series of actions or steps taken in order to achieve a particular end, often structured and repeatable in business and manufacturing contexts.

Control Charts

Statistical tools used in quality control processes to analyze and understand process variations over time.